2018 begins with electricity bills still heading upwards

Lack of wind power and hydro-electricity forces the use of more expensive fossil fuels in generation

As the new year begins it is becoming clear that household electricity bills are unlikely to reverse the upward trend of the second half of 2018, as the cost of production reaches almost double that of a year ago due to a variety of factors.

In the first week of 2019 the cost of producing a megawatt hour (MWh) had risen to 64.03 euros, lower than the all-time record in Spain which was set in September 2008 but, on 1st January at least, still the highest in Europe, according to national newspaper ABC. Data also show that the average for the whole of 2018 reached 57.28 euros per MWh, again the second highest figure behind that of 2008, and that in the second half of the year the figure was above 60 euros every month.

Fortunately for consumers, not all of this inflation makes its way into our monthly bills, as the cost of production has a weighting of only around 35 per cent in the amount charged (the rest being accounted for by taxes and regulated costs). But even so, it is inevitable that domestic bills do suffer the consequences to a certain extent, and this is due largely to factors beyond the control of the electricity companies.

For example, the generation of electricity from wind turbines, one of the cheapest sources, was 40 per cent lower during the autumn of 2018 than the year before, while at the same time the tax on CO2 emissions (associated with fossil fuel and gas production) rose from 8.25 euros per ton in 2017 to 25 euros in 2018.

On top of which, of course, the cold snap which is affecting almost the whole of Spain in the second week of the year has increased demand, and that extra demand has to be met using fossil fuel production rather than wind turbines, hydro-electricity or nuclear power: indeed nuclear power production is currently well below 100 per cent due to some plants having been temporarily shut down and others running at less than full capacity.

All of which means, unfortunately, that with heaters on practically all day as even the city of Murcia reaches freezing point, January bills are likely to be particularly unwelcome!